Unbundled Healthcare… Does the future promise a few “star” clinicians and a skinny delivery platform?

Recently there has been a lot of recent commentary on how online university courses are disrupting traditional universities.

Besides offering convenience to students, online offerings are cost-effective because they “unbundle” education— removing all of the overhead typically associated with providing a college education. Gone are the ivy covered walls, support workers and large libraries of a typical university. Instead, online students now have direct access to top professors through low-cost broadcast centers and online platforms.This is an emerging issue that is rippling through the education industry: it creates a situation where:

1) Fewer professors are needed, and only the best survive.

2) The complex and costly infrastructure normally required to provide a college education is massively trimmed.

3) A narrow population of superstar professors emerge (who are very well compensated since the revenue they can generate per hour of work is exponentially higher than before).

In other words, we are seeing the emergence of “skinny platforms” which support a handful of superstars: it is a profound “distillation” of the product consumers are seeking.

The New York Times recently wrote about this phenomenon, quoting the dean of the University of Wisconsin’s business school.

François Ortalo-Magné, dean of the University of Wisconsin’s business school, says fissures have already appeared. Recently, a rival school offered one of his faculty members not just a job, but also shares in an online learning start-up created especially for him. “We’re talking about millions of dollars,” Mr. Ortalo-Magné said. “My best teachers are going to find platforms so they can teach to the world for free. The market is finding a way to unbundle us. My job is to hold this platform together.” (NYT 6/1/14)

Let’s flip to health care, which, like education, has seen costs rise far faster than general inflation—it’s another industry ripe for disruption. Many thinkers have suggested that physician salaries will fall in the coming few years as the system tries to get costs in line.

An alternative, and more likely scenario, to my mind, is the unbundling of the medical delivery platform. The major savings will come from reducing the massive administrative overhead associated with delivering care: the huge medical campuses; billing, coding, compliance and the like.

As with education, a few other downstream scenarios may play out as the patient/ star provider relationship is distilled:

1) Because you can’t leverage physician services the way that a camera leverages a lecture (somebody has to do the appendectomy after all…) there will continue to be ample business for the top group of clinicians. But not for everyone: “stars” will be leveraged to the extent that one “star physician” with charisma, a set of expert protocols and a focused team of advanced practitioners will unseat a cadre of lower-quality doctors.

2) High-cachet healthcare brands such as Children’s Hospital in Boston and Sloan Kettering Cancer Center will need to find a way to sell their “star power” while managing to unbundle their high-cost platforms. If they can’t, less prestigious but lower-priced (and potentially equally good) firms will erode their market-share. The market’s tolerance for inflated prices will only go so far.

Unbundling in healthcare will be facilitated by three things: 1) medical innovation that allows care to be delivered outside the hospital; 2) ongoing development of non-physician clinicians (such as nurse practitioners) and 3) direct to consumer technology such as online portals, telemedicine and low cost retail clinics.

“Managing capitation can be deceiving. Like flying an airliner, the gauges, levers and controls can make it seem like high-stakes science. It is, partly. But as with all things healthcare this is ultimately about humans, their needs and their behaviors. You eventually learn that managing the payment model is as much an art as is the actual practice of medicine”.